Are Solar Panels Worth it?

Are solar panels worth it?

Are you thinking about installing solar panels? Many people wonder if they can afford it, if the panels produce enough energy, and if they’ll save money on their electric bills. If you’ve found yourself wondering whether solar panels are worth it—read on!

Electric utility bills are most homeowners’ largest monthly bill after the mortgage and car payments.

Here, we take a look at the cost of electricity, compare the price of solar power versus utility electricity, and find out how long it takes for solar panels to pay for themselves.

We’ll also look at energy security from utility blackouts, affects on real state values, and environmental benefits to see if solar panels are worth it for most homeowners.

The electric company’s rates go up between 3 to 10% every year. SDG&E recently received approval for a 6.74% electric rate increase in 2020, and a 4.83% increase in 2021.

The electric utility company has a monopoly.

You will pay them for the rest of your life as long as you’re connected to their electric grid.

Until about twenty years ago, there was no alternative to the electric utility company. And then, solar power systems became affordable, and solar financing was made available, and homeowners began to have choices and the potential for significant savings.

Today, you have Solar Power options.

In most cases, when you’re looking into going solar, you’re looking to eliminate as much of the electricity you buy from the electric company as possible. A 100 percent offset is the goal.

Your specific electric usage, available space for solar panels, and several other factors will decide how large a solar energy system you need (see our article on “How many solar panels do I need?” for more information). How big a system you have room for is often a different story.

Most solar power systems are grid-tied, meaning your home is still connected to the electric utility company through their meter. During the day, you’ll be sending the utility company any excess energy that your system is producing.

You’ll receive net energy metering (NEM) credits for the energy you send the utility company and then use those credits at night when the solar power system is not generating electricity, and you’re consuming electric company power (check that your utility company provides NEM credits).

A 100 percent offset solar power system will result in you paying nothing for electricity from SDG&E at the end of every 12 months, what’s commonly called a Net-Zero home.

Note that solar customers still have a monthly bill from SDG&E to be connected to their utility, and receive Net Energy Metering credits for the electricity you send to them, and be able to use those credits and their energy at night. The minimum bill amount is currently $10/month as of this writing.

It’s common for your available roof space or other factors to prevent a 100 percent offset of your electric bill. As long as you can offset 50 percent or more of your electric usage, the math usually works out in your favor. Only a real solar analysis can find out.

With that said, since we’ve completed over 10,000 solar sales and installations, we can give you some good ballpark figures.

How much does solar energy cost?

Solar electricity rates in 2019:

6 to 8 cents per kilowatt-hour (kWh) if paying cash for the system.

10 to 15 cents per kilowatt-hour (kWh) if financing through a bank or solar loan.

10 to 18 cents per kilowatt-hour (kWh) if financing through a solar lease or power purchase agreement (PPA).

1,000 kilowatt-hours (average household use per month) x $0.13 average financed kWh of solar energy = $130 per month solar electricity cost for the average household.

The electric company bill for the same energy was $288 per month.

That’s a savings of $158 per month for solar power versus the SDG&E electric rates!*

No more paying for electricity for life!

Solar energy systems are either paid for either in cash, or more commonly through financing until it’s paid off.

All of the electricity the system produces after that is FREE forever (if you purchased instead of leased).

It’s like receiving a “Get out of Jail FREE card!” Instead of serving a life sentence with the utility company, your future solar power can be free.

Do you really save money with solar panels?

As you can see by the example shown above, solar electricity can cost less than half of current utility company rates, depending on how you finance it.

Even when using a zero-money-down solar loan, it’s common to save money beginning in the very first month your solar power system is turned on. Your total electric bill would be less each month than what you’re already paying.

If you’re paying cash, payback is fast, and then you’ve eliminated one of your most significant monthly bills for decades.

How long will it take for solar panels to pay for themselves?

Solar panels pay for themselves surprisingly fast, and quality modules will provide free electricity for decades after that. Let’s take a closer look.

Solar panels are rated in Watts.

A premium, high-efficiency 350-Watt solar panel (module) costs around $1,000 installed (we’re a little on the high-side here to be conservative).

There’s a 26 percent federal income tax credit if the system is installed by the end of 2020, which gets deducted and leaves an average net cost of $740 per solar panel.

Depending on many factors, including which compass direction the solar panels are facing (south to west is best), the average quality module will produce about 1.6 kilowatt-hours (kWh) each year for every rated Watt here in San Diego.

As such, a 350-watt premium solar panel multiplied by 1.6 equals 560 kilowatt-hours (kWh) produced by each solar panel each year.

So, a premium 350-watt solar panel with a net cost of $740 will produce about 560 kilowatt-hours (kWh) of electricity every year, which equals a price of 7.6 cents per kWh.

Solar energy storage systems can nearly eliminate the threat of power outages. Solar power with a smart inverter and battery backup system can store the excess energy produced during the day instead of sending it to the utility company.

You would then use the battery power at night first, before using any utility company electricity (if at all needed).

In the case of a utility company blackout, your property would still have the available battery and solar power for use.

You can also design a solar with a battery backup system to work without being connected to the electric utility grid.

Note: properties with standard grid-tied solar power systems without batteries will lose all power if there is a utility company blackout. Utility companies cannot have solar electricity sent into a grid they need to repair and the inverters used are not designed to disconnect from the utility grid and operate independently as battery backup “smart inverters” and controllers are.

Conversely, solar energy systems with a smart inverter and battery backup system can work even when there’s a utility company blackout.

With planned electric blackouts becoming a common occurrence in California due to wildfires, having a battery backup system makes more sense than ever for many families and businesses.

If you have critical electric loads that can’t be shut down, or if you want to “Own Your Power” and not fall victim to electric utility blackouts, then a solar energy system with battery backup may be the solution for you.

Solar Can Power Real Estate Values

Look around, and you’ll see solar panels on more and more roofs in California. That’s because electric utility company rates are high, and we have lots of sunshine. It’s a perfect combination that motivates homeowners to look for alternatives and switch to solar to save money.

In January of 2020, all new homes built in California must have enough solar panels built in to provide all the home’s power, a Net-Zero Home.

Most homes with solar power have meager electric utility bills. That keeps their monthly operating expenses low, and that’s an attractive benefit to homebuyers.

More and more, when we sell our California homes, we’ll be competing with homes that have solar energy.

Be aware that solar leases and power purchase agreements can make selling a home more difficult because the new homebuyer will have to qualify to take over that financing or pay it off completely. This qualifying process has proven to disrupt and end many escrows.

Owning your solar power system gives YOU the power. You can add the value of the system to the sale price of the property — you have control, there’s no extra qualifying for anyone.

Solar Power Is Clean Energy

Solar energy is the most abundant source of energy in our known universe.

The Sun provides both heat and light. The heat can be used for heating a home, pool, or spa, and the light can be converted into electricity to power your home or business.

If the manufacturer of your solar panels or inverters won’t be around to warranty their products, you might have a financial disaster on your hand. Especially if they didn’t manufacture quality products.

Price is always an issue when buying anything, but when comparing solar energy systems, it should not be the primary driving force behind your decision.

Be sure you are comparing high-efficiency products with comparable high-efficiency products. Apples to apples.

Have your investment advisor look at the financials of the manufacturers the solar installers recommend to you. Google them and do some research.

Choosing a solar energy system based on price alone stands a higher likelihood of costing you the most over time (in repairs and lost electricity you now have to buy from the utility again).

Phil Edwards is President of Jamar Power Systems. With over 30 years of electrical contracting experience, his companies have wired over 30,000 housing units, including 1000's of residential solar installations. His company is a member of WECA and BIA.